Reader Mailbag #27

Each Monday, The Simple Dollar opens up the reader mailbags and answers ten to twenty simple questions offered up by the readers on personal finance topics and many other things. Got a question? Ask it in the comments. You might also enjoy the archive of earlier reader mailbags.

As usual, we’ll start things off with a few links to older articles that directly answer questions I’ve heard recently.
When does all the hard work of saving money pay off?
How it felt to hit my financial rock bottom
What I did next
And now for some great reader questions!

I am saving $2500/month. I have no debt and I’m 26. My question is what do I do with the money – I really want to invest it in index funds and I feel that it is the right thing to do, but with the market being the way it is, I can’t bring myself to do that when my HSBC savings account guarantees a 3.5% return. What would you do with the monthly saving if you were in my shoes?
– Joe

Joe, your question is emblematic of a lot of questions that I hear. To put it bluntly, you’re putting the cart before the horse.

Why are you saving $2,500 a month? What is the purpose of socking away $30K a year? What are you intending to do with it? Are you going to buy a house? Are you going to start your own business? Are you planning on just dropping out of the rat race in fifteen years?

Figure out what your goals are, then figure out a timeline for those goals and what you need to save to make them happen. Remember, longer-term goals (those more than 10 years down the road) often are best served with stock investments (as they have the potential for big gains), while shorter term goals (those less than 5 years) are best served with very stable investments, like bonds and treasury notes and even high-interest savings accounts.

Let the goals lead you.

Do you have any advice on being effective and efficient on social media sites like Twitter & StumbleUpon?
– Laura

Frankly, I don’t use them very much at all. I like Twittering sometimes, but mostly as a way to just toss off some fun random thoughts. I find most of the social bookmarking sites not compelling enough for me personally to get deeply involved.

Your best bet, if you want your site to be popular on social media sites, is to write good stuff that people want to read and link to. The more good stuff you write, the more likely people are to eventually discover it and share it themselves.

Obviously, you need those initial eyeballs. The best way to do that is to simply link a lot to sites somewhat more popular than you, but not incredibly more popular. If you link to Lifehacker, they won’t notice – they get hundreds of links a day and only notice it when “big” sites link to them and drive significant traffic. Instead, link to sites with roughly 1.5 to 2 times as many subscribers as you have. You should also talk to other bloggers that are even more popular in your genre.

Once you start generating links – and they will start if your writing is good – it seems to almost self-perpetuate as long as you keep writing good stuff.

I recently started a home-based business.
I am struggling to figure out how to get the money for inventory, which I desperately need to have on hand to demonstrate before I can sale them.
My husband and myself are disabled and the only income we live off of is his disability. Our credit is beyond bad, so needless to say we can not get a loan or finance anything.
I have tried to search for grants, but have been told there are no grants for individuals unless it is a non-profit.
I have also considered finding a sponsor but have been unsuccessful.
I need between $2000. to $2500. dollars to get the inventory, and the office space, supplies, etc.
Any help, advice would be greatly appreciated. I am 54yrs, old and tired of struggling from hand to mouth, there has got to be something out there that would benefit not only myself, but the population I would serve.

– Deborah

Have you considered looking for an investor in your business from within your family? Perhaps someone you know will put up the money for a slice of your business, or maybe they’ll give you a low-interest loan to help you get started.

It sounds to me like you have a good idea but you need a bit of cash to get things going. Given the amount, I’d start with family members. If no family members are available, stop by your local credit union and ask about small business loans.

My wife and I are still working out the details, how do you make your kids do their own thing, rather than pushing your agenda on them?
– SteveJ

Even from an early age, I was interested in stuff that my parents were not. My mom’s solution was simple – as long as I wasn’t doing anything illegal or unethical, she gave me a lot of free reign. She took me to the library to find out more about whatever I wanted and, whenever I did have an interest, she would encourage me to follow it, no matter what it was.

My parents only ever wanted one thing from me, that I was a good person who treated others well. That’s all they wanted – anything else I did was up to me. If you have an “agenda” for your kids because you believe you know what’s best for them, dial it back a little. Instead, watch what they’re interested in and encourage them strongly in that direction.

For example, if you want your kid to be an engineer, but they loathe math class and spend all day in their room playing on that infernal keyboard, maybe there’s a clue right there. Instead of preaching about college and good grades, get them some sheet music and encourage them to join a band.

Your goal as a parent should be just to ensure that they have a good framework to build upon: solid character, a desire to learn and grow, and the basic social and life skills they need. Beyond that, it’s really up to them. Focus your energy more on teaching them basic life skills and let them find their own path and their own passions.

Yesterday I received an offer from a bank to open up a new checking account. I saw that they also offer checking accounts to college students and high school students, as long as the parents co-sign. I had to call, and was horrified to learn that 13 year-olds qualify. What do you think about this?
– Francine

A checking account can be a good learning tool for a thirteen year old. Why not? It teaches them about account management, how to write checks, how to use a debit card, how to read statements, and so on. Those are all lessons you can be involved with as a parent, because a thirteen year old is starting to take their first steps into the real world independent of you and it’s your job to teach them life skills.

I am thinking of investing in a good quality microshredder. Would you recommend one? I have a big pile of photocopies which should be shredded before discarding and hence I am primarily interested in good capacity.
– Pankaj

From my experience, all of the Fellowes PowerShred models are solid. It all comes down to how much you value your time, really. If you buy a more expensive one – like the PowerShred SB-97Cs – you’ll get through your shredding substantially faster (because the shredder runs faster, it has a larger bucket, and you can put in more pages at a time), but you’ll pay substantially more up front.

A “big pile of photocopies” might be 50 – in which case a low end one will suffice – or it might be 2,000, in which case a high-end one would be more time-effective, especially if you’ll have more in the future. We’ve had two low-end ones over the last several years and, honestly, I’ve hated them both.

Trent- here’s a question for you. While perusing one of my free credit reports, perhaps with much more thoroughness than normal, I stumbled upon my good “friend” AMEX, and realized they’ve done some major pulling from my credit reports- 13 times since 12/2006. I do not have any accounts with them. Know any tricks, tips, etc. to ask them to stop? I think that’s pretty ridiculous.
– Amanda

Most likely, those pulls are “soft pulls,” meaning they have no effect on your credit rating. Those are done mostly as a pre-screen to send you credit card offers, and there’s not much you can do to keep a specific company from doing “soft pulls” on your account.

There are some sites out there that claim to allow you to “opt out” of prescreened credit card offers, but I have serious questions about their legitimacy and wouldn’t give my personal information to them. Instead, just don’t worry about it – take those credit card offers and just shred ’em.

On your recommendation, I picked up Ticket to Ride as a birthday gift for my husband. We both love it and we play it several times a week! How did you find out about Ticket to Ride and how can I find other games like it?
– Lisa

Ticket to Ride is part of a genre of board games often referred to as “Eurogames” or “European board games.” I was first introduced to the genre by a friend, who got me into playing Settlers of Catan, which I played literally hundreds of times with my wife and another friend of ours.

After a while, I began to seek out other games like Settlers and I found the best board game resource on Earth – BoardGameGeek.com. It’s a gigantic collection of board game reviews, comments, and recommendations of all kinds. One great place to start is their “Top 100” list, which lists the highest rated games of all time on the site.

Be aware that some of the games you’ll find there are substantially more complicated than Ticket to Ride. One thing that might be useful if you’re starting from being familiar with Ticket to Ride is the “You Might Also Enjoy…” section on BGG’s Ticket to Ride page, which includes Settlers of Catan, Power Grid, and Carcassonne, all of which we own and like.

I tend to spend very little on clothing, because it seems like a waste of money to me. Recently, though, I’ve been pushed up into a much higher paying job at work where everyone else dresses in new and expensive clothes. Yesterday, one of my new coworkers took me aside and basically told me in no uncertain terms to upgrade my wardrobe. What should I do?
– Helen

You need to update your wardrobe, not because you personally value it, but because it’s part of the expected decorum of your workplace. For better or worse, professional attire is an expected part of certain jobs. From my perspective, it’s a hidden cost – if you’re spending $2,000 of your post-tax income each year on dressing for “success,” that’s actually about $3,000 or so in lost salary just for the clothes. Sometimes high-paying jobs aren’t all they’re cracked up to be.

So, how do you go about updating your wardrobe for cheap? My vote is to pick sturdy clothes that mix and match well together so that you can appear to have a diversity of outfits without actually having that full of a closet. Your best bet is probably to grab the most professional-looking dresser in your office place and ask where they shop, then use that as a starting point.

The bill from this is likely going to be painful. Consider it a necessary expense for the nice new job you have, though.

How do you handle it when you’re having a dinner party where you’d like to invite more people than you have room for?
– Annie

It depends on how formal the dinner party is. If things are formal enough that your head count is locked pretty tight, my suggestion is to host a number of parties in reasonable succession so that all the people you want to invite get an invite to at least one dinner.

I know at least one family that seems to have a weekly dinner party with a widely rotating list of guests. They do this to maintain a strong social network and it seems to work well for them. Perhaps you could get into a regular routine of having these events and change up the invite list each time so that people you want to invite don’t get left out all the time?

Got any questions? Ask them in the comments and I’ll use them in future mailbags.